Report Puts Utility Share of San Onofre Costs at $762 Million

In a preliminary victory for customers of Southern California Edison and San Diego Gas & Electric, a state Public Utilities Commission staff report recommended Tuesday that the companies bear “at least” $762 million of the cost of building the San Onofre Nuclear Generating Station in northern San Diego County.

The utilities, calling the finding “unreasonable” and “Monday-morning quarterbacking,” will get their chance to rebut the staff recommendation in public hearings before the commission later this year. A ruling is not expected before next year.

Figure Could Grow

However, the director of the PUC’s public staff division, which produced the recommendation, emphasized that the cost figure is “preliminary” and could grow beyond $762 million by the time the hearings convene.

A measure of the financial stake to the utilities is that Southern California Edison earned $732.4 million for its shareholders last year.

If the company covers the amount recommended by the staff report, it could wipe out much of a year’s earnings for the utilities’ shareholders. On the other hand, because construction costs are normally recovered through higher rates over a number of years, the effect on utility customers would be relatively modest--about a 3% cut in rates, according to the commission. An SDG&E; spokesman estimated typical savings for customers at $15 a year. The utility supplies electricity to 52,615 customers in southern portions of Orange County.

Edison owns 75% of San Onofre. SDG&E; owns 20% and the cities of Anaheim and Riverside together own 5%.

The PUC’s public service division, whose job is to represent utility customers before the commission, based its recommendation on a $1.7-million study begun in January, 1983, by outside consultants. William R. Ahern, the division director, said the consultants’ initial impression after completing the first phase of their study was that construction of the $4.5-billion San Onofre project was “well managed.” Total costs compared favorably with those of other nuclear projects across the company, he said.

‘Serious Problems’ Cited

“But,” Ahern added, “after the detailed consultant investigation of 16 issues--such as use of scheduling techniques, quality control and coordination of construction--the public staff has a different impression.” He said detailed examination turned up “serious problems” with management of the project, which was designed and built by Bechtel Power Corp. of San Francisco.

The consultant, O’Brien-Kreitzberg & Associates, identified 624 days of “avoidable delay” in building San Onofre’s Unit 2 and 468 such days for Unit 3. Evidence submitted by the utilities fails to justify an additional 150 days at each project as well, said James J. O’Brien, a partner in the firm.

“By the end of the project, the cost of a day of delay had increased to about $1 million in carrying charges,” said Jeffrey P. O’Donnell, who headed the San Onofre inquiry for the PUC public staff. “The avoidable costs due to these delays come to about $710 million. Then consultants found about $50 million, mainly in specific labor and material costs, that could have been avoided.”

O’Donnell concluded that San Onofre could have been completed “about two years earlier, at much less cost.”

Special Pipe Hangers

As an example of avoidable delay, the PUC staff charged that the project lost at least six months because of poor design work on special pipe hangers, which then were submitted to a supplier already “overloaded” with filling orders for 10 other Bechtel nuclear projects.

More than three months were lost because Edison failed to produce enough senior reactor operators to begin commercial operation of Unit 2 after 16 of 18 candidates failed the Nuclear Regulatory Commission’s licensing examination because of “inadequate training programs and inappropriate work assignments,” the staff charged.

Later, Unit 3 was delayed “at least 215 days” because of a shortage of pipe fitters to install pipe supports--after workers had to be pulled off the job to install the late pipe hangers at Unit 2, the study said.

In the staff recommendation, Ahern noted that, in 1970, when the utilities applied to the PUC for authority to undertake the project, they estimated that it would be ready in 1976 and cost $437 million. Unit 3 began commercial operation in April, 1984, he noted.

Conservation Concerns

Allen, Edison’s chairman, said construction had been prolonged and the cost increased by conservation requirements imposed by the California Coastal Commission and by modifications ordered by the Nuclear Regulatory Commission to enhance the plant’s ability to withstand a major earthquake and other safety threats.

“Needless to say, we are shocked by the public staff’s recommendation,” said Howard P. Allen, Edison’s chairman and chief executive. “It is totally unjustified. It’s one thing to academically review the process in hindsight; it’s quite another thing to build the plant under real-world conditions.”

SDG&E; echoed that sentiment, calling the recommendation an “inappropriate disallowance” of costs that should be recovered from customers. “This represents Monday-morning quarterbacking and the creation of a new standard in the perfection of foresight,” said Lou Bernath, SDG&E;’s nuclear department manager. “We’re hoping that the PUC will not follow the staff suggestion.”

An Edison spokesman declined to comment on the possibility that Bechtel might share financial responsibility for any construction costs that the commission refused to include in rates. A Bechtel spokesman said the company would support the utilities’ efforts to rebut the PUC public staff recommendation, adding: “We intend to show that the allegations concerning our work are based on an apparent misunderstanding of the construction procedures followed at San Onofre.”

San Diego County Business Editor Bill Ritter contributed to this story.